Exclusive: After fire, Wal-Mart vows to tighten source safeguards

(Reuters) - A factory fire that killed more than 100 garment workers in Bangladesh has led the world's largest retailer, Wal-Mart Stores Inc, to concede that it needs to do more to control its supply chain and keep unauthorized manufacturers out.

In an interview with Reuters, his first since the November 24 Tazreen Fashions fire, Wal-Mart Vice President of Ethical Sourcing Rajan Kamalanathan said the company's current controls could only go so far in preventing a factory Wal-Mart did not approve of from making its clothes, as was the case here.

"If a supplier or an agent chooses to subcontract without informing us, then that is a problem," Kamalanathan said. "We can put all kinds of controls in place, but if they don't tell us where they're putting our order, then that is a problem."

Wal-Mart has said repeatedly that its Faded Glory clothing should not have been in production at the Tazreen factory, a facility Bangladeshi authorities said was not safe for use. The building was not cleared to be used by any party manufacturing garments for the world's largest retailer.

Wal-Mart says that in 2011 alone it audited over 9,000 factories globally to check whether its standards were being met. But still, Wal-Mart acknowledges it only controls its supply chain up to a certain point. If suppliers hired by Wal-Mart in turn hire agents who then line up production, the seemingly tight controls Wal-Mart has put in place can fail.

"We have a contract with the supplier and that's where our control is and where our relationship is," Kamalanathan said.

The lack of control down the supply chain represents a challenge not just for Wal-Mart, but for the industry overall, Kamalanathan added.

Companies such as Bentonville, Arkansas based Wal-Mart must figure out how get more involved in the operations of factories in countries such as Bangladesh, rather than hoping that contact with suppliers and factory audits will suffice.
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